EmpiresX ‘head trader’ to face 4 years of prison over $100M crypto ‘Ponzi’

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One of the lead­ing fig­ures con­vict­ed of being behind the $100 mil­lion cryp­to “Ponzi” scheme, EmpiresX, has just been hand­ed an over four-year jail sen­tence by a Unit­ed States court.

The sen­tenc­ing was hand­ed to Joshua David Nicholas, the “head trad­er” of pur­port­ed cryp­to plat­form EmpiresX, who is nowset to serve a 51-month prison sen­tence along with three years of super­vised release for his role in the fraud­u­lent scheme. 

It fol­lows a Sept. 8 guilty plea from Nicholas for con­spir­a­cy to com­mit secu­ri­ties fraud.

Accord­ing to the Depart­ment of Jus­tice (DOJ), over a two-year peri­od, Nicholas made claims the plat­form would make dai­ly “guar­an­teed” returns using a trad­ing bot that uti­lized “arti­fi­cial and human intel­li­gence” to max­i­mize returns. 

In real­i­ty, the “bot” was fake, and Nico­las and his asso­ciates, Emer­son Pires and Flavio Goncalves, oper­at­ed a “Ponzi” scheme that paid ear­li­er investors with mon­ey from lat­er investors. The DOJ alleges blockchain ana­lyt­ics shows Pires and Goncalves, both Brazil­ian nation­als, laun­dered investors’ funds through a “for­eign-based” cryp­to exchange.

Only around $1 mil­lion of investor funds were sent to a futures trad­ing account for EmpiresX with the major­i­ty of funds either lost or mis­ap­pro­pri­at­ed accord­ing to the Com­mod­i­ty Futures Trad­ing Com­mis­sion (CFTC) which filed civ­il actions against the three in June.

At the same time, fraud charges were lev­eled against the trio by the Secu­ri­ties and Exchange Com­mis­sion (SEC) which said investor mon­ey was used to “lease a Lam­borgh­i­ni, shop at Tiffany & Co., make a pay­ment on a sec­ond home, and more.”

Relat­ed: Hash­Flare founders arrest­ed in ‘astound­ing’ $575M cryp­to fraud scheme

Investors were also told EmpiresX was reg­is­tered with the SEC as a hedge fund and that Nicholas was a licensed trader.

The SEC said the plat­form was nev­er reg­is­tered with the Com­mis­sion and Nicholas’ was sus­pend­ed from trad­ing by the Nation­al Futures Asso­ci­a­tion for mis­ap­pro­pri­at­ing cus­tomer funds.

The scheme ran for two years, from around Sep­tem­ber 2020 until ear­ly 2022 when it fell apart as the plat­form refused to hon­or cus­tomer with­drawals who were like­ly want­i­ng to leave the cryp­to mar­ket due to sig­nif­i­cant price draw­downs that began at the time.

Pires and Goncalves, who were resid­ing in Flori­da, alleged­ly began wind­ing down the oper­a­tions of EmpiresX in ear­ly 2022 and left the U.S., they are now believed to be in Brazil.

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